Following the unexpected surge in Q2 GDP, which beat most analyst estimates, there was widespread expectation that based on real-time data, the revised Q2 print would be worse. So perhaps it is appropriate that the Bureau of Economic Analysis punked everyone once again, when moments ago it released the first revision to the Q2 GDP print, which instead of dropping to the consensus expected 3.9%, it instead rose to 4.2%, up from the 4.0% initial report.
The headline print of a record-breaking 22.6% gain - smashing the 8.0% expectation - hides the extremely obvious factor of the largest civilian aircraft orders (an entirely one-off non-repeatable factor). Durables ex Transportation collapsed from a 3% gain to a 0.8% drop - the biggest drop in 2014, missing expectations by the most in 8 months. Perhaps even more concerning, non-defense ex-aircraft new orders dropped 0.5% (missing expectations of a 0.2% gain).
- Jackson Hole Theme: Labor Markets Can’t Take Higher Rates (BBG), or anything else for that matter
- Kidnappers free American missing in Syria since 2012 (Reuters)
- More unpatriots: Burger King in merger talks with Canada's Tim Hortons (Reuters)
- California Quake to Cost Insurers Up to $1 Billion, Eqecat Says (BBG)
- Congo declares Ebola outbreak in northern Equateur province (Reuters)
- Missouri Governor Defends Ferguson Prosecutor (BBG)
- Kuroda Douses Japan Stimulus Expectations (WSJ)
- London Jihadi Call Vies With Banks in Canary Wharf Shadow (BBG)
- Netanyahu Signals Expansion of Air Attacks in Gaza (WSJ)
- Libya's Islamist Militias Claim Control of Tripoli (WSJ)
Dispassionate overview of the week ahead, with thoughts about September.
Just the usual warmongering soundbites, because someone clearly is on a mission to escalate the cross border hostilities into all out war. From Reuters:
- UKRAINE MILITARY SPOKESMAN LYSENKO SAYS RUSSIA HAS 45,000 TROOPS ON ITS BORDER WITH UKRAINE WITH TANKS, MISSILE SYSTEMS, WARPLANES AND ATTACK HELICOPTERS
And meanwhile, from the other side: LAVROV: ONE MAY GET THE IMPRESSION THAT THE COUNTERTERRORISM OPERATION IN UKRAINE AIMS TO WIPE OFF SOUTHEASTERN UKRAINE FROM THE FACE OF THE EARTH AND TO MAKE ALL RUSSIANS GO
- Maliki digs in as U.S. pushes for new Iraq government (Reuters)
- Ukraine's forces say close to taking rebel-held Donetsk (Reuters)
- Anger Over Michael Brown Shooting Leads to Looting (WSJ)
- German Economy Backbone Bending From Lost Russia Sales (BBG)
- Kinder Morgan to Consolidate Empire (WSJ)
- Early Failure to Detect Gaza Tunnel Network Triggers Recriminations in Israel (WSJ)
- You’ll never guess how much BuzzFeed raised from Horowitz (FT)
- The dumb money is now chasing Chinese oligarchs: Norway’s Wealth Fund Buys $576 Million of Mayfair Area (BBG)
- Clinical trial to start soon on GSK Ebola vaccine (Reuters)
- No drone skeet shooting any time soon (WSJ)
The West's leaders are full of lawyers, Putin is ex-KGB. If ever there was an example of him playing chess while the West plays checkers, the following chart is it. Despite Western protestations that its sanctions will hurt Russia more than Europe this morning, one look at Europe's huge net trade balance with Russia for food and it's clear who is really going to feel the pain. As Martin Armstrong noted previously, "Putin has responded to [Western] sanctions as any really smart chess-player would - you get the supporters of your adversary to jump-ship." What better way to crack the 'stop-Putin' alliance than to force Europe into trade deficits and squeeze their economies (especially Germany)?
Sadly for the central planners, while they succeeded in the first part of their plan, namely getting investors to flee from money market funds, they failed in getting the money to flow into the desired asset class: stocks. Instead, money market funds are rushing at an unprecedented pace into that other most hated by the Fed, after precious metals of course, asset: Treasurys. Most hated because declining yields disprove all the propaganda about an improving economy as they do, or at least did, imply deflation down the road: hardly the stuff robust 3%+ recoveries are made of.... But before we declare victory over central planning, don't forget that the "regulators", the Fed and the SEC, are already contemplating the next step: recall that as we reported in June, "the Fed is preparing to impose "exit fee" gates on bond funds, in what, the official narrative goes, is an attempt to prevent a panicked rush for the exits. Of course, this is diametrically opposite of what the truth is."
In an effort to expose the effect of Ex-Im Bank's financing (costs and benefits) on America, Mercatus Center has created 2 charts. Perhaps unsurprisingly, the maps show that Washington state, home of Boeing, garners the bulk of the benefits in terms of both Ex-Im Bank disbursements and as a percentage of total state export value, even though taxpayers across the nation are equally exposed to liability.
Russia Accuses US Of Fabricating Satellite Images, Creating "Wall Of Propaganda" To Incite Other CountriesSubmitted by Tyler Durden on 08/02/2014 15:47 -0400
It was ten days ago when on the heels of Russia's 30-minute detailed presentation of what it believes happened to MH-17, the US government released a satellite trajectory map of what it says was the flight's path and the site from which the missile was shot as well as various other satellite images "proving" the missile that took down the Boeing 777 was fired by the pro-Russian separatists. Yesterday the Russian defense ministry finally responded to the US release stating that the "satellite images Kiev published as ‘proof’ it didn’t deploy anti-aircraft batteries around the MH17 crash site carry altered time-stamps and are from days after the MH17 tragedy." In other words, the evidence the US has present to form public opinion was in the form of "altered images carrying wrong time-stamps."
- EU finalises Russian sanctions as BP warns of impact on business (FT)
- Geopolitical Risk Rises for Global Investors (BBG)
- Jaded Argentines brace for looming debt default (Reuters)
- In Argentina, Mix of Money and Politics Stirs Intrigue Around Kirchner (WSJ)
- Mom ‘Trusting God’ for Ebola-Infected U.S. Doctor’s Life (BBG)
- Thanks NSA: Tech Companies Reel as NSA's Spying Tarnishes Reputations (BBG)
- Goldman unit eyes foray into China amid metals financing scandal (Reuters)
- Cash out time: London’s Gherkin Tower Offered for Sale by Its Lenders (BBG)
- Apenomics strikes again: McDonald’s Japan axes profit guidance amid food safety scandal (FT)
- Do you see what happens Larry when you are the only USDJPY bid? Nomura Profit Falls More Than Estimated on Broking Slump (BBG)
- EU to weigh extensive sanctions on Russia (FT)
- U.S. lifts flight ban to Israel (Reuters)
- Russia says will cooperate with MH17 probe led by Netherlands (Reuters)
- Norway faces ‘concrete and credible’ terrorist threat (FT)
- Don’t Tell Anybody About This Story on HFT Power Jump Trading (BBG)
- But... but... PMI: Unilever Sales Growth Misses Estimates on Asian Slowdown (BBG)
- World’s Biggest Wealth Fund Reviews $8 Billion Russian Stake (BBG)
- Qualcomm latest US tech company to reverse in China (FT)
- Hamptons Home Sales Rise as Buyers Find More Inventory (BBG)
Ever since going public, it appears that Markit's giddyness about life has spilled over into its manufacturing surveys: after a surge in recent Markit mfg exuberance in recent months in the US, it was first China's turn overnight to hit an 18 month high, slamming expectations and fixing the bitter taste in the mouth left by another month of atrocious Japan trade data (where even Goldman has thrown in the towel on Abenomics now) following which the euphoria spilled over to Europe just as the triple-dip recession warnings had started to grow ever louder and most economists have been making a strong case for ECB QE. Instead, German July mfg PMI printed at 52.9, above the 52.0 in June and above the 51.9 expected while the Composite blasted higher to 55.9, from 54.0, and above the 53.8 expected thanks to the strongest Service PMI in 37 months! End result: a blended Eurozone manufacturing PMI rising from 51.8 to 51.9, despite expectations of a modest decline while the Composite rose from 52.8 to 54.0, on expectations of an unchanged print. Curiously the soft survey data took place as Retail Sales declined both in Italy (-0.7%, Exp. +0.2%), and the UK (-0.1%, Exp. 0.3%), which incidentally was blamed on "hot weather." Perhaps Markit, now that it has IPOed successfully, can step off the gas or at least lobby to have surveys become part of GDP.
On a day with no macro data and more warmongering, it only makes sense that stocks should continue to levitate. Aside from The Dow (troubled by weakness in Boeing dragging 20 points off the index), US equity markets rose with the S&P 500 breaking to new all-time record highs just shy of 1990 (2000 tomorrow?) Treasuries were very quiet, trading in a 2bps range and ending basically unch. Gold and silver limped lower (but were also quiet) as the USD pushed modestly higher (with AUD strength on the inflation print overnight the big story). Oil prices recovered yesterday's losses closing back above $103. Biotechs were a notable mover (on M&A hopes) as they retraced all Yellen's warning losses. This is the 3rd day in a row that "most shorted" stocks were snap-squeezed higher at the open.
Despite yesterday's lackluster earnings the most recent market levitation on low volume was largely due to what some considered a moderation in geopolitical tensions after Europe once again showed it is completely incapable of stopping Putin from dominating Europe with his energy trump card, and is so conflicted it is even unable to impose sanctions (despite the US prodding first France with BNP and now Germany with the latest DB revelations to get their act together), as well as it being, well, Tuesday, today's moderate run-up in equity futures can likely be best attributed to momentum algos, which are also rushing to recalibrate and follow the overnight surge in the AUDJPY while ignoring any drifting USDJPY signals.